Wildly Bullish Liquidity Flows Should Benefit Stocks More Than Treasuries – Professional Edition

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Here are a few of the key bullet points from this report.

• The 10 year yield abruptly reversed on Friday, spurred by the jobs news, but underlain by bank and FCB selling, and increased Primary Dealer shorting of 10 year futures. It’s not yet clear whether this is an acceleration of the intermittent shift in sentiment away from Treasuries. The 1.79-.80 area is a key benchmark.

• After seeing the most bullish liquidity conditions of the year in April, the markets will still see bullish liquidity conditions. It won’t be as much as in April, but more Treasury paydowns are coming in May and June to add to Fed cash injections to the market.

• Strong tax collections have blown away previous forecasts. We’ve been expecting reduced Treasury supply and that was confirmed by the new TBAC estimates released last week.

• The surge of liquidity in April stacked the deck for the markets’ reactions to the jobs numbers when there was just a tiny positive surprise in the numbers.

Read about these and the following subjects in this report.

Table of Contents

Treasury Auctions
Week Just Completed
Week Ahead
Treasury Auction Takedowns By Investor Class
Primary Dealer Trading
Bond Fund Flows
Bank Purchases Of Treasuries
Federal Government Cash Flows
10 Year Treasury Yield
US($) Dolor Index

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Lee Adler

I’ve been publishing The Wall Street Examiner and its predecessor since October 2000. I also provide analysis and charts for David Stockman's Contra Corner which I developed for Mr. Stockman. I’ve had a wide variety of finance related jobs in the past 44 years, including a stint on Wall Street in both analytical and sales capacities. Prior to starting the Wall Street Examiner I worked as a commercial real estate appraiser in Florida for 15 years. I also worked in the residential mortgage and real estate businesses in parts of the 1970s and 80s. I have been charting stocks and markets and doing analytical work since I was a teenager. My perspective is not of the Ivory Tower. It is from having my boots on the ground and in the trenches of the industries that I analyze and write about today.